TaxTMI 
TaxTMI 
2025 (1) TMI 134
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....that the petitioner has a prior and first charge over the secured assets and the petitioner-bank shall be at liberty to enforce its right under the provisions of the Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 (for short "SARFAESI Act") in respect of the secured assets. 2. By an order dated 15th September, 2022 passed in this Writ Petition, "RULE" was issued so also the petitioner-bank was allowed to go ahead and confirm the auction sale. In order to protect the interest of respondent No. 5-(Deputy Commissioner of State Tax), the petitioner was directed to deposit from the sale proceeds, a sum of Rs.1,50,000/- with the Registrar, Appellate Side, High Court of Bombay. The said amount was directed to be invested in a Fixed Deposit with a Nationalised Bank. The respondent Nos.2 to 4- (Talathi, District Collector and Tahsildar of District Palghar) were directed to take steps, to have the lien entry in the mutation records cancelled within one week. FACTS 3. The petitioner-bank sanctioned a credit facility to the respondent No. 6-(Texplast Industries Limited). In order to secure credit facility for the amount of Rs. 42,61....
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....d a letter to the petitioner informing the petitioner about the outstanding arrears of Sales Tax of the respondent No. 6-(Borrower) and called upon the petitioner to stop the process of attaching the property (secured assets) and further, the auction of the said property. The petitioner by a letter dated 22nd May, 2018 replied that being a secured creditor, they would have priority over the secured assets under the provisions of the SARFAESI Act. 8. The respondent No. 5-(Deputy Commissioner of State Tax) by his order dated 11th December, 2018 attached the secured assets against the non-payment of sales tax dues by respondent No. 6- (Borrower) amounting of Rs. 1,12,78,272/- (Rupees One Crore Twelve Lakhs Seventy Eight Thousand Two Hundred Seventy Two Only). Pursuant to which the respondent No. 2-(Talathi) recorded mutation entry No.1087 of the secured assets about encumbrance in favour of the respondent No. 5-(Deputy Commissioner of State Tax). 9. Thereafter, the petitioner-Bank issued an E-auction notice dated 27th April, 2022 for the sale of the secured assets. Pursuant to the order passed by the District Magistrate, Palghar, the Tahsildar took possession of the secured asse....
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....f the petitioner made his submissions. He submitted that the Section 26 (E) of the SARFAESI Act being a non-obstante clause, puts a secured creditor in first priority over any other debts and all revenue, taxes, cesses and other rates payable to the Central Government or State Government or local authority. He further submitted that there is similar kind of provisions under Section 31B of the Recovery of Debt Due to Bank and Financial Institutions Act, 1993, wherein the secured creditors are given the priority over any other debt or statutory liability. He further submitted that as per Section 37 of the SARFAESI Act, the provisions of the SARFAESI Act shall be in addition to and not in derogation of inter alia RDB Act or any other act. In addition to this, it is important to note that the Section 35 of the SARFAESI Act has an overriding effect over all laws for the time being in force. He submitted that the Writ Petition be allowed. 14. Ms. Shruti Vyas, the learned Additional Government Pleader appeared on behalf of the respondent-State and made her submissions. She submitted that the State Tax Department continuously followed with the concerned Talathi office in order to regist....
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....ured creditors to register their security interest, to be entitled to exercise the rights of enforcement of securities. 21. Section 26-E of the SARFAESI Act reads as under:- "26-E. Priority to secured creditors. - Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority." 22. The Full Bench of this Court in Jalgaon Janta Sahakari Bank Ltd. (supra) has clarified the issue of priority of security creditor. Paragraphs 78, 79, 84, 85, 88, 150, 153, 154 and 155 of the said judgment which read as under:- "78. Section 26-E, also beginning with a non-obstante clause, is unambiguous in terms of language, effect, scope and import. A 'priority' in payment over all other dues is accorded to a secured creditor in enforcement of the security interest, if it has a CERSAI registration, except in cases where proceedings are pending under the provisions of the Insolvency and Bankruptcy Code, 2016. ....
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....ues could be put up for sale to realize such dues in terms of the MLR Code and the 1967 Rules usal of the 2016 Amending Act would show that the dues of the Central/State Governments were in the specific contemplation of the Parliament while it amended the RDDB Act and the SARFAESI Act, both of which make specific reference to debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority and ordains that the dues of a secured creditor will have 'priority', i.e., take precedence. Significantly, the statute goes quite far and it is not only revenues, taxes, cesses and other rates payable to the State Government or any local authority but also those payable to the Central Government that would have to stand in the queue after the secured creditor for payment of its dues. 150. The contention that rules are yet to be framed for making sub-section (4) of section 20B operational is wholly incorrect. By a notification dated 24th January 2020 issued by the Department of Financial Services in the Ministry of Finance, Govt. of India, published in the Gazette of India of even date, the Securitisation and Reconstruction of....
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....e secured dues of the secured creditors; but in the absence of an order of attachment being made public in a manner known to law, i.e., by a proclamation, once Chapter IV-A of the SARFAESI Act or section 31B, as the case may be, has been enforced, the dues of the secured creditor surely would have 'priority'. In other words, if the immovable property of the defaulter is shown to have been attached in accordance with law prior to Chapter IVA of the SARFAESI Act, or for that matter section 31B of the RDDB Act, being enforced, and such attachment is followed by a proclamation according to law, the 'priority' accorded by section 26E of the former and section 31B of the latter would not get attracted. 155. To answer this question, we need to take note of some provisions of the Security Interest (Enforcement) Rules, 2002 (hereafter '2002' Rules, for short). However, it must be borne in mind that while a secured creditor is concerned only with sale of the immovable property, being the secured asset, and no other property of the defaulting borrower, the concern of the department need not necessarily be confined only to the secured asset but could well spill over and any other asse....